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Mindful modernization in financial services

Create the institution of tomorrow without abandoning the business you’ve built

In the financial services and insurance industry, it’s easy to be overwhelmed by pressure to modernize, as well as pressure not to modernize. Moving into the future is essential — but not all outcomes are created equal.

Embrace mindful, holistic modernization

It’s no secret that financial institutions rely heavily on mainframes — including 88% of the top 50 banks and 80% of the top ten US insurance companies. Yet mainframes can’t keep up with the recent explosion of regulations, along with higher consumer expectations. The one thing the industry can’t afford to do is stand still. Financial services and industry firms must embrace modernization while remaining mindful of risk. Planning each step separately or waiting until the last second won’t suffice. Instead, firms must plan and execute the entire modernization process as a holistic journey. This approach makes it possible to achieve industry-leading customer experience (CX) and security, while preserving decades of essential business logic.

Mainframes must move forward

For all their power, mainframes are a drag on financial resources, innovation and agility. Mainframes typically consume 70% of an IT department’s budget, according to Gartner. Plus, as mainframe experts age and retire, finding replacements is a major challenge. While cloud platforms are a key component of modernization, Forrester reports that mainframes have hindered nearly 50% of insurance firms from migrating to an agile, cloud-based dev system.

Many banks and insurance firms only touch the mainframe when absolutely necessary because they could disrupt core business processes.

Yet the longer the mainframe stagnates, the more outdated the company’s CX and security measures become. Last year, only 35% of global purchase influencers at banks saw accelerating their digital business as a high or critical priority.

In order to control risk while remaining agile and keeping up with constantly-evolving threats and regulations, executives need a comprehensive plan to enter the modern era.

Many banks and insurance firms only touch the mainframe when absolutely necessary because they could disrupt core business processes. Yet the longer the mainframe stagnates, the more outdated the company’s CX and security measures become.

The benefits of good partners and good planning

By planning your full transition away from the mainframe, you can track and protect essential business logic as you move from step to step. You can also apply the savings from each step of the journey to fund the next one. To maximize benefits and minimize risk, you should partner with a service provider that can:

1. Manage your mainframe in-place, providing skilled resources and laying the foundation for future steps

Finding a partner capable of effectively managing your mainframe can quickly solve major problems. In industries like capital markets, banking and insurance that rely heavily on mainframes, the risk of skill shortages is high as mainframe specialists take early retirement or leave the workforce — a dynamic accelerated by COVID-19. If your partner can provide access to skilled mainframe resources, you greatly reduce the risk of losing veteran mainframe programmers that are becoming more and more difficult to replace. In addition, you can take advantage of your partner’s economies of scale — using that savings to reinvest in the next phase of the modernization journey.

2. Migrate your mainframe to improve cloud integration and eliminate CapEx

The next step is to move the mainframe off-site and eliminate CapEx. Your partner should either offer its own infrastructure, or work with a hyperscaler like AWS, Azure or Google. If your partner has a strong relationship with the hyperscalers, you can migrate to high availability zones for ultra-low-latency connections between mainframe and cloud applications. Migration can have a huge impact on your operations. It not only has the potential to reduce infrastructure costs, but also cuts energy consumption and leads to massive performance improvements.

3. Modernize apps to unlock immediate and long-term value enhancements

Modernizing your apps increases agility, allowing you to support cloud-native architecture, implement best practices like Agile DevOps, and realize strong CX and cybersecurity. You can also interface with a rich partner community. A complete exit from on-premises legacy data centers can make your technology environment more available, reliable, scalable and agile — but that’s only the beginning. It also paves the way for continuous innovation by integrating the best open-source technology.

4. Establish a healthy commercial model and scale modernization

Once you’ve modernized an initial set of functions, you can scale the process and work with your partner to target other legacy systems. Notwithstanding, it’s important to investigate your partner’s commercial model and ensure it benefits you in the long-term. You should move toward an outcome-based pricing model, where the partner assumes most of the risk for the journey, as well as a few other key details. The best partners can leverage their size and buying power for lower rates and exclusive deals with software and hardware vendors, as well as hyperscalers. Your partner should also offer flexible, consumption-based pricing, to ensure you can scale your mainframe up or down in real-time and pay only for what you need.

A few key questions

There are a few important questions to ask before making decisions about your service provider partner. They must be proficient at every stage of the journey, but make sure to investigate their track record and partner ecosystem. You should also ensure your partner can assume most of the risk with comprehensive SLAs, timelines and outcomes. To avoid disruptions or surprises between steps, you need a cross-functional team with experience in every aspect of modernization. You should plan this in parallel with choosing a modernization partner, so they can provide team members as well.

Ready to go? Not quite. Here are a few important points to consider first:

Questions you must answer:

1. What core business logic do we need to preserve?
2. What value can we generate from a complete modernization journey?
3. Who should spearhead the modernization process? How can we consolidate cross-department support and create a cross-functional team?

Questions your partner must answer:

1. What level of risk are you willing to accept? How are those outcomes protected by the SLAs, timeline, and high-level goals we agree on?
2. What experience do you have running mission-critical infrastructure for financial institutions?
3. What is your track record with migrating mainframes?
4. What options do you have for hosting our mainframe? Do you work with hyperscalers, and if so, what benefits can we receive from that partnership?
5. Are you able to purchase the hardware and software we need at a lower cost than we could, and will you pass those savings onto us?
6. Do you offer consumption-based pricing? When we eventually shift away from mainframe, do we immediately stop paying for mainframe services, or are there residual costs?

Take the first steps

Now that you understand the value of a mindful migration, you can get started. If you are interested to learn more about migrating from mainframe to the cloud, I encourage you to read our latest Digital Vision opinion paper. Atos has extensive experience helping financial institutions plan and carry out modernization journeys, and we would be glad to help answer any questions you have, or help take the first steps on your journey.

By Andrew Dunmore, Atos Head of Financial Services & Insurance Cloud Specialty Sales, North America

Email: andrew.dunmore@atos.net

Posted on: February 4th, 2022

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About Andrew Dunmore
Atos Head of Financial Services & Insurance Cloud Specialty Sales, North America
Andrew Dunmore is a Managing Director at Maven Wave, an Atos Company, where he heads the financial services and insurance consulting practice and leads cloud for the respective industry vertical at Atos North America. With nearly two decades of experience in a broad range of roles in financial services, Mr. Dunmore leads strategic partnerships and teams for customers to deliver digital transformation on the cloud for clients in capital markets, banking, and insurance.   Contact me here: andrew.dunmore@atos.net

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